New Car Tech Could Cancel Out the Rise in Accidents From Phones and Pot

By

Tae Kim

Nov. 27, 2018 2:19 p.m. ET

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The adoption of car safety technologies will significantly lower the number of vehicle crashes, reversing the rising accident trend over the last seven years, says
Bank of America Merrill Lynch.

After a 30% increase in U.S. motor vehicle accidents since 2011, the firm predicts the number of accidents will return roughly to its prior level over the coming decade. Analyst Steve Byrne said the 3% to 4% annual increase in crashes in that time period was due to higher employment, more miles driven, distracted driving due to rising smartphone use and marijuana legalization in some states.

“With the benefit of these forces on accident rates likely to fade and increasing penetration of collision avoidance technology in automobiles, a return to a structural decline in accident rates seems likely,” he wrote on Tuesday.

The analyst estimated distracted driving from smartphone use accounted for 20% of the rise in accidents since 2011. He cited how 91% of drivers owned a cellphone in 2016 versus 52% in 2011, according to a 2016 State Farm survey. The same report said internet access activity while driving doubled to 29% compared to 2011’s level with 77% of drivers saying the action increased the likelihood of a crash.

Last month, the Insurance Institute for Highway Safety (IIHS) also published a report that revealed states with legalized marijuana sales had a 5% increase in police-reported crashes compared to neighboring non-legalized states, Byrne said.

Despite these detriments, the analyst predicts collision avoidance technology will lower the number accidents by 20% to 30% by the 2030s. IIHS has said crashes are reduced by up to 40% when vehicles have advanced driver assistance systems installed.

The analyst said 99% of U.S. cars will have front crash prevention systems standard by 2022.

If Byrne’s prediction comes true, it will be a return to the secular decline of accidents, which occurred from 1988 to 2011, falling 1% per year on average.

In terms of long term investment implications, a decline in the number of car crashes will hurt chemical makers
Axalta
(AXTA) and PPG Industries (PPG). The companies generate 20% and 10% of their earnings, respectively, from car paint refinishing.

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